China Banking Regulatory Commission (CBRC) issued Guidelines on Risk Management of Loans Extended by Commercial Banks for the Purpose of Acquisition (the “Guidelines”) on December, 9th, 2008.  The Guidelines overturn a long-standing restriction on the granting of bank loans for equity investments in China. The initiative will expand the financing channels available to Chinese enterprises and is expected to boost both onshore and outbound mergers and acquisitions (M&A) activity.

The Chinese government has announced a series of macro-adjustment measures recently, promoting industrial upgrade and encouraging promising M&A transactions. More and more companies are involved in M&A activities recently with greater demand for M&A financing. Commercial banks also demonstrate their willingness to make M&A loans. In the meantime, Chinese government has promulgated more policies on boosting domestic demand, and extending stronger support to M&A transactions. It’s just the right time for CBRC to introduce such guidelines. The main idea of the guidelines is to require qualified commercial banks strike the balance between the market demand and their risk appetite. For commercial banks, M&A financing is not only a credit tool to support strategic M&A, but it should also be put under sound risk management framework.  China Banking Regulatory Commission, December 2008.

Under the Guidelines, a commercial bank is required to establish its loan management procedures and information system for the acquisition loan business based on the principle that such procedures and system for the acquisition loan business must be more stringent than other types of loan business.

CBRC stipulates that the following requirements must be met for banks to be qualified for M&A lending: good risk management and internal control mechanism; adequacy ratio of loan loss provision not less than 100%; capital adequacy ratio not less than 10%; and professional teams on M&A due diligence and credit risk assessment.

The Guidelines point out that commercial banks must require the borrower to provide adequate guarantees, including but not limited to asset-backed, equity pledge, and third-party guarantees and other forms of security in compliance with the law.

The Guidelines are expected to be a boost to the local M&A market and would help domestic companies undertake overseas M&A activities. Industry insiders explain that an M&A loan is similar to a bridge loan, which is used as a short-term transition loan. The issuing of an M&A loan is to promote “small risk to large”.  The “snake eating the elephant” approach to M&A transactions contends that once it is backed by funds, is more likely to be successful. However, the actual implementation of the Guidelines remains to be seen.

12/29/2008   Source: Xinhua

Human Resources and Social Security Minister Yin Weimin said here on Monday that China aims to create 9 million new jobs in urban districts next year.

Yin said China wants to keep the registered urban unemployment rate under 4.6 percent next year.

The economic slowdown due to the financial crisis will add difficulties for Chinese [seeking] employment. The job situation in China is grim, so effective measures must be taken to help new graduates, migrant workers or other groups, he said.

The urban unemployment rate in the past five years was below 4.3 percent, but this year’s target was set at 4.5 percent because of the severe employment situation.

The government was trying to reduce the burdens of employers by such methods as deferring payment of social security funds.

Unemployed migrant workers who return home are being encouraged to start businesses. They will get credit extensions, tax breaks, business registration and information consulting service, according to the country’s central rural work conference, which concluded on Sunday.

Ministry of Agriculture figures from 10 provinces and municipalities show that about 7.8 million migrant laborers had returned home earlier than in previous years for the Spring Festival.

12/30/2008  Source: China Daily

Twenty-two dairy firms whose products were found contaminated with the industrial chemical melamine are likely to pay 1.1 billion yuan ($160 million) to compensate families of babies who died or fell sick after drinking the tainted milk, official sources confirmed yesterday.

About 900 million yuan ($131 million) of the amount will be paid in cash as one-off compensation, the China Business News reported yesterday.

The remaining 200 million yuan ($29 million) will go to a new medical fund to cover bills for any lingering health problems related to the tainted milk, a source from the China Insurance Regulatory Commission said.

China Life, the country’s biggest life insurer, has been appointed to manage the compensation fund, the source said. The insurer would not disclose any details of the latest move yesterday.

Families of children who died after drinking the contaminated milk will each get 200,000 yuan ($29,000), and seriously sickened children will get about 30,000 yuan ($4,400) each. Those suffering minor kidney problems from the tainted milk will each receive 2,000 yuan ($292), Guangzhou Daily reported yesterday, quoting unnamed directors of health bureaus in Dongguan of Guangdong province.

At least six babies were killed and 294,000 others suffered kidney problems after drinking the tainted milk products, most of which were produced by the Shijiazhuang-based Sanlu Group in Hebei province, figures from the Ministry of Health showed. Illegal milk dealers used melamine as an additive to boost false protein levels in dairy products.

Lawyers for the families of children sickened by the tainted milk said they welcomed the move to help victims, but said the compensation plan would likely be inadequate and lacked transparency.

A number of families in Hebei and Shandong provinces have already received calls from local governments, asking them to sign an agreement to accept the 2,000 yuan of compensation, Xu Zhiyong, a Beijing lawyer who led about 200 families asking to be compensated for drinking the tainted milk, told China Daily yesterday.

“We consider the solution to be a process of moving toward the right direction it’s not a one-off move,” he said.

Zhao Lianhai, founder of a website offering help to babies suffering from the kidney ailments, said the decision to set up such a fund to cover victims’ future medical costs was “necessary but insufficient”.

“Most parents found the 2,000 yuan too inadequate to accept,” he told China Daily yesterday.

A number of afflicted families from Jilin, Shandong and Chongqing reportedly said yesterday they had not been notified of any kind of compensation.

“If the compensation is just 2,000 yuan, I won’t accept it,” said Yang Yanli, a mother of a 4-year-old girl who still has serious urinary problems after drinking Sanlu’s milk since 2006. “That is far below the amount I need to treat my child.”

Many families of babies affected by the tainted milk are not included in the latest compensation, website founder Zhao said.

Li Yijuan, a 34-year-old mother from Hunan province, said her son, who went through surgery for kidney-stone ailments last week, is not covered in the plan. She said her son had taken milk powder from Sanlu for seven years before the scandal broke out.

“We cannot enjoy free medical care, let alone any compensation, because my son is already 8 years old. The local government said only babies suffering from kidney problems could receive free medical care,” Li, who lost her husband years ago and has been laid off, told China Daily yesterday.

“I borrowed most of the 30,000 yuan needed for surgery costs from my relatives,” Li said. “And there are still two stones in my son’s kidney.”

More on trial

Nine more suspects involved in the tainted milk scandal stood trial in four courts in Hebei, following the trial of the first batch of six suspects last Friday.

The four suspects tried at the Shijiazhuang Intermediate People’s Court yesterday included a couple, Gao Junjie and Xiao Yu, both 32. Prosecutors said they designed melamine-tainted “protein powder” last year in an underground factory in Zhengding county near Shijiazhuang.

The couple, together with two other suspects, Xue Jianzhong and Zhang Yanjun, were accused of employing workers to produce about 200 tons of the powder, adding the chemical to raw milk and selling supplies to Sanlu for a profit of more than 1 million yuan.

The other five suspects facing similar charges stood trial in courts in Zhaoxian and Xingtang counties, as well as Luquan city. All suspects face the maximum death penalty.

(Agencies)
Updated: 2008-12-02 16:19

Chinese gross domestic product (GDP) is likely to grow 9 percent next year thanks to Beijing’s huge stimulus package and an easier monetary policy, the Chinese Academy of Social Sciences (CASS), the government’s top think-tank, said on Tuesday.

At this moment, I still think China’s GDP will rise 9 percent in 2009. The likelihood of this scenario is more than 70 percent,” Wang Tongsan, a senior CASS researcher, said in a news release setting out its forecasts for next year.

But Wang attached two conditions to the scenario: that the US economy touches bottom soon and that China’s pro-growth economic policies have a clear impact.

The central bank slashed borrowing costs by 1.08 percentage points last week, the deepest cut in 11 years, to complement a 4 trillion Yuan ($586 billion) stimulus plan unveiled on November 9.

The CASS’s forecasts for 2009 include:

– Consumer prices to rise 4 percent on average

– Fixed-asset investment to rise 20 percent

– The trade surplus to come out at $236.9 billion

– Retail sales to rise 16 percent

– Broad M2 money supply to grow 16-17 percent

– The urban jobless rate to reach 4.3 percent

http://www.chinadaily.com.cn/bizchina/2008-12/02/content_7262041.htm

(China Daily)
Updated: 2008-12-02 07:25

President Hu Jintao Monday visited a hospital treating AIDS patients, calling for more efforts to raise awareness on the prevention of the fatal disease and help those afflicted with it.

It was the third time in five years that Hu inspected AIDS prevention work by meeting medical staff, researchers and patients, the Xinhua News Agency reported.

At the Beijing Ditan Hospital, Hu shook hands with two women infected with HIV – the virus that causes AIDS – and asked the patients about their health and concerns.

One of the patients, a 28-year-old woman who wanted to be known as Xiao Zheng, told Hu she was found infected with HIV last December when she was pregnant. With the hospital’s help, she received free medication to prevent the virus from being transmitted to her daughter. Her child, now six months old, is in sound health.

The other HIV-positive woman, who wanted to be known as Xiao Xia, later told Xinhua that Hu’s visit gave her “warmth and encouragement”.

The hospital acts as a social community providing HIV carriers with services including psychological treatment, AIDS counseling and legal assistance.

In the infectious disease center of the hospital, which is also the country’s clinical pharmacology base for HIV/AIDS and offers free AIDS management services, Hu examined the facilities and spoke with researchers about issues ranging from their work to the equipment they used.

The president spoke highly of the center’s achievements in the field of anti-viral vaccines and new medicines, stressing that “science and technology must used to conquer the disease”, Xinhua reported.

A joint investigation by a United Nations agency, health officials and the World Health Organization found that there were about 700,000 Chinese in the country living with HIV/AIDS at the end of last year, 85,000 of whom were suffering from full-blown AIDS.

Beijing HIV Infections Down:

A total of 755 people in Beijing were diagnosed with HIV between January and October, latest figures from the municipal health bureau showed.

The number represented a 22.4 percent drop in HIV patients in the capital year-on-year.

Up till October, Beijing authorities registered 5,635 HIV/AIDS patients, of whom 219 were foreigners, 1,184 local residents and 4,232 people from other parts of the country, a report released by the municipal health bureau on Nov 26 showed.

Sexual transmission had overtaken intravenous injections as the main channel of contracting the virus for the first time, the report stated, while cases of HIV infection have reportedly been rising among gay men.

The capital has also set up nine methadone clinics to contain the spread of HIV and stem the use of intravenous drugs, the report said. Anyone aged 20 or older can visit the clinics for 10 yuan ($1.45) a day.

More than 500 methadone clinics have been set up across the country, offering treatment for almost 440,000 HIV carriers and AIDS patients, the report said.

http://www.chinadaily.com.cn/china/2008-12/02/content_7258384.htm

(Agencies)
Updated: 2008-12-02 16:19

Chinese gross domestic product (GDP) is likely to grow 9 percent next year thanks to Beijing’s huge stimulus package and an easier monetary policy, the Chinese Academy of Social Sciences (CASS), the government’s top think-tank, said on Tuesday.

At this moment, I still think China’s GDP will rise 9 percent in 2009. The likelihood of this scenario is more than 70 percent,” Wang Tongsan, a senior CASS researcher, said in a news release setting out its forecasts for next year.

But Wang attached two conditions to the scenario: that the US economy touches bottom soon and that China’s pro-growth economic policies have a clear impact.

The central bank slashed borrowing costs by 1.08 percentage points last week, the deepest cut in 11 years, to complement a 4 trillion Yuan ($586 billion) stimulus plan unveiled on November 9.

The CASS’s forecasts for 2009 include:
– Consumer prices to rise 4 percent on average;
– Fixed-asset investment to rise 20 percent;
– The trade surplus to come out at $236.9 billion;
– Retail sales to rise 16 percent;
– Broad M2 money supply to grow 16-17 percent;
– The urban jobless rate to reach 4.3 percent.

http://www.chinadaily.com.cn/bizchina/2008-12/02/content_7262041.htm

Beijing, China

Robert J. Allan recently spoke at The 2nd International CEO Roundtable of Chinese and Foreign Multinational Corporations, in Beijing, China on November 16, 2008.  Mr. Allan gave a speech about the “Western and Chinese Perspective of Corporate Social Responsibility”.

The Roundtable forum was sponsored by China International Institute of Multinational Corporations and seven UN organizations, including the United Nations Commission on Sustainable Development, United Nations Development Programmer, United Nations Conference on Trade and Development, United Nations Industrial Development Organization, United Nations Environment Programmer, and the United Nations Global Compact Office and South Centre.

Participants in the event included: 20 CEOs or vice-presidents from global Fortune 500 Companies, 100 CEOs or vice-presidents from China Fortune 500 companies, envoys to China from various countries, directors of industrial development zones, bank presidents, stock exchange chairmen, foundation presidents, and 11 leaders from foreign chambers of commerce in China.

The Roundtable also included: 15 Chinese ministers or vice-ministers, Chinese and foreign mayors or deputy mayors, representatives from the Association for Relations Across the Taiwan Straits and Straits Exchange Foundation, and UN officials also attended the conference.

After the Opening Ceremony, the speaker sessions included ‘The Roundtable of Industrial and Commercial Leaders’, ‘Forum on Energy Crisis and Environment Deterioration’, ‘Forum on Inflation and Financial Crisis’, ‘Forum on Corporate Social Responsibility’, ‘Forum on Protectionism and Equal Development’ and ‘Forum on Harmonious Development’.